Builder Confidence Again Drops Sharply

A grim November home builder index didn’t improve in December amid persistent concerns over housing affordability, the National Association of Home Builders reported yesterday.

The NAHB/Wells Fargo Housing Market Index fell by an additional four points in December to its lowest reading since May 2015, after dropping by eight points in November. The 56 reading remains above the 50 reading marking conditions for home builders as better than worse, but much of the momentum of the past three years was lost in the past two months.

All three HMI indices posted declines. The index measuring current sales conditions fell six points to 61, the component gauging expectations in the next six months dropped four points to 61, and the metric charting buyer traffic edged down two points to 43.

Regionally, three-month moving averages saw the Midwest drop two points to 55; the West and South both down three points to 68 and 65, respectively; and the Northeast falling eight points to 50.

“Builders report that consumer demand exists, but customers are hesitating to make a purchase because of rising home costs,” said NAHB Chief Economist Robert Dietz. “However, recent declines in mortgage interest rates should help move the market forward in early 2019.”

Dietz added builder confidence dropped significantly in areas of the country with high home prices, “which shows how the growing housing affordability crisis is hurting the market. This housing slowdown is an early indicator of economic softening, and it is important that builders manage supply-side costs to keep home prices competitive for buyers at different price points.”

Last week, the Mortgage Bankers Association Builder Applications Survey data for November show mortgage applications for new home purchases decreased by 14 percent from October and by 11 percent from a year ago.

MBA estimated new single-family home sales at a seasonally adjusted annual rate of 627,000 units in November, a decrease of 6.8 percent from October (673,000 units). On an unadjusted basis, MBA estimated 45,000 new home sales in November, a decrease of 15.1 percent from 53,000 new home sales in October.